Hibbett Sports 2012 Annual Report Download - page 27

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Fiscal 2012 Compared to Fiscal 2011
Net sales. Net sales increased $67.7 million, or 10.2%, to $732.6 million for Fiscal 2012 from $665.0 million for Fiscal
2011. Furthermore:
 We opened 49 Hibbett Sports stores and 3 Sports Addition stores while closing 17 underperforming Hibbett Sports
stores and 1 Sports & Co. stores for net stores opened of 34 stores in Fiscal 2012. We expanded or remodeled 18
high performing stores and converted 1 Sports & Co. store to a Hibbett Sports store. New stores and stores not in
the comparable store net sales calculation accounted for $24.9 million of the increase in net sales. Store openings
and closings are reported net of relocations.
 We experienced a 6.8% increase in comparable store net sales for Fiscal 2012 compared to Fiscal 2011. Higher
comparable store net sales contributed $42.8 million to the increase in net sales.
During Fiscal 2012, 762 stores were included in the comparable store sales comparison. The increase in comparable
store net sales was broad-based with strong performances across footwear, equipment, apparel and accessories. Strong product
performances were led by positive trends in all categories of activewear and in accessories, footwear, and licensed apparel.
Lightweight running shoes continue to be a key driver in our footwear business while kid’s footwear was particularly strong in
Fiscal 2012. The majority of our comparable store sales increase was from increased consumer traffic and somewhat from
increased retail prices. Strip locations continue to outperform enclosed mall stores. Strip center locations now comprise
approximately 77% of our total store base and include free-standing store locations.
Gross profit. Cost of goods sold includes the cost of inventory, occupancy costs for stores and occupancy and
operating costs for the distribution center. Gross profit was $262.4 million, or 35.8% of net sales, in Fiscal 2012, compared with
$230.4 million, or 34.7% of net sales, in Fiscal 2011.
 Gross profit percentage was impacted by a higher percentage of merchandise sold at regular price and fewer
company-wide promotions. Gross profit percentage also benefited from an improvement in inventory shrinkage
year over year. Strong sales performance and improved aged inventory negated the need for liquidating
promotions and more favorable discounts from vendors resulted in higher initial sell-through of inventory at
regular prices. As more of our technology investments for inventory management are implemented, we expect to
continue to see improvement in our gross profit percentage.
 Distribution expense as a percentage of net sales increased 8 basis points resulting primarily from increases in data
processing third-party services. In Fiscal 2012, we initiated broadband service in over 95% of our existing stores.
We also experienced an increase in freight costs due to higher gas prices. We expect to see increases in this
expense line into Fiscal 2013 based on the current volatility in the oil markets and unrest in the Middle East.
 Store occupancy expense as a percentage of net sales decreased 45 basis points. The largest decrease as a percent
to net sales was rent expense as we continue to experience rent savings through lease renegotiations and from co-
tenancy violations by our landlords, offset somewhat by a decrease in construction allowances used to offset rent
expense. We believe we are a valued tenant for our landlords, which enhances our ability to renegotiate lease
terms at renewal, and we have had success over the last few years in doing so as our landlords are struggling to
keep their properties occupied. We expect to continue to experience rent savings through lease renegotiations into
Fiscal 2013.
Store operating, selling and administrative expenses. Store operating, selling and administrative expenses were $155.7
million, or 21.2% of net sales, for Fiscal 2012, compared with $143.2 million, or 21.5% of net sales, for Fiscal 2011. Expense
trends we experienced included:
 Salary and benefit costs in our stores remained relatively constant as a percentage of net sales, but increased in
dollars, primarily from annual pay rate increases and incentive payments associated with higher sales as well as
with the growth in stores. As our store base grows, we expect an increase in salary and benefit dollars, but believe
these costs as a percentage to net sales will remain relatively stable.
 Salary and benefit costs decreased at the administrative level by 22 basis points as a percentage of net sales
primarily due to a decrease in the accrual for annual bonuses and a decrease in hospital insurance resulting from
lower claims. We expect hospital insurance costs will increase in Fiscal 2013.
 Business insurance was lower due to lower actual claims and a decrease in casualty and workers’ compensation
insurance premium expense.
 Recent trends of increasing credit card processing fees slowed this year as we realized the benefit of lower debit
card processing exchange rates.